Taxi to Jhumri Telaiya

Rashmi Pratap | Updated on September 12, 2014

Unlimited options: Tier II cities are good for radio cabs as they have to travel relatively shorter distances to pick up clients. Photo: Nagara Gopal

Jet set go: Meru cabs, which launched in June in Jaipur, are already making profits in the Pink City

Small towns are revving up the radio cab business as incomes, and aspirations, climb steadily beyond the metros

In Lucknow, the eight-seater rickshaw, or tum-tum, always seemed just right for the slow and grandiose pace of this erstwhile city of nawabs. But now that the capital of Uttar Pradesh is eager to speed along the development highway, the rusted and ill-maintained tum-tums are giving way to air-conditioned sedans as Lucknavis discover the convenience of radio cabs.

Cut to Jaipur. Tired of haggling over transport fares, tourists as well as young professionals are making a beeline for Meru Cabs, which launched services here in June last year and is already profitable.

This, then, is where all the action is right now for radio taxis — the India beyond metros, where incomes and aspirations are rising.

Ready to ride

“We started in Lucknow in October 2012 with 15 cars, making just five-six trips a day. But we knew there was a latent demand for reliable and efficient transport,” says Shashank Agarwal, CEO of Flash Cabs.

Just a year-and-a-half later, Flash Cab’s fleet stands at 40, clocking 200 trips a day. And more than 60 per cent of customers are women looking for a safe commute. In other smaller cities such as Pune, Amritsar, Chandigarh and Ludhiana, a rapidly growing community of small and medium enterprises, apart from professionals, is relying on radio taxis.

“The fact is that tier II cities are ready for organised car rental services. People are aware and more businesses are now originating out of them,” says Sakshi Vij, Executive Director of Carzonrent, which operates radio taxis under the Easy Cabs brand. The company will launch services in Ahmedabad, Pune, Chandigarh and Jaipur in the next six months.

The readiness of these markets to pay ₹18 or ₹20 per kilometre is not the only draw for operators. Newly developed infrastructure, including airports, is a major factor too. Kunal Lalani, chairman of Mega Cabs, points out that when they started in Chandigarh in 2008 there were only two daily flights. Today there are over 10.

Smaller is better

Nearly 65-70 per cent of the business comes from services to and from airports and railway, says Lalani. Tier II cities are good for them in other ways too. As the cities are more compact, there is less dry run — the kilometres a vehicle has to travel before picking up a passenger and running the meter. “Dry run is much less as people know the places well and there is only one downtown unlike in the metros,” says Siddharth Pahwa, CEO of Meru Cabs.

Moreover, a car that lasts four years in a metro can remain in running condition for up to six years in a tier II city — it would clock 275-300km a day in the metros, compared with 200km in a smaller city.

With cost of living markedly lower in tier II centres, “the expectations of drivers are lower” there, says Lalani. Drivers in metros command ₹17,000 to ₹22,000 a month, while those in a small town rarely earn beyond ₹12,000. “Overall, we are able to get returns in line with big cities,” says Pahwa. “Every market has a different potential and capability to pay for different services. We evaluate each market on the basis of existing players,” he adds.

In the flight path

The taxi business in the metros is grappling with several new challenges today. With privatisation, major airports such as Delhi, Mumbai and Bangalore now come out with request for proposals (RFPs) for cab operations every three years. This means that whoever bids the highest amount that can be shared with the airport gets the rights to enter the terminal to look for passengers. The rest cannot do so. In Delhi’s T1 terminal, for instance, only Easy Cabs has access; it’s Meru and Mega for T3.

The taxi operator ends up sharing with the airports nearly 25-30 per cent of the daily average transaction cost. An income of, say, ₹1 lakh a day will leave the operator poorer by ₹25,000 to ₹30,000.

The absence of privatised airports in tier II centres makes them attractive to cab operators. “In the metros, costs are also spiralling. Tariffs are increased only once in three years while cost of fuel, staff, call centres and technology goes up every year,” says Lalani.

The larger volumes in the metros are negated by the high service costs. When it comes to return on investment, the tier II city has nearly pipped the metro to the post. Little wonder that radio taxi operators seem more than happy to drive at high speeds into the non-metros.

Published on March 21, 2014

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